As an investment, it’s been tough being a bull in Hexo (NYSE:HEXO) the past few months. Still, could Hexo stock finally be worth the risk and deserving of room in your portfolio today? For that answer, let’s take a look both off and on the price chart to reach a more informed decision.
Let’s face it, a speculative cannabis market isn’t without its very real challenges for Hexo. In large part it’s why shares of HEXO have lost 55% of their value with Monday’s low in hand and in just four short months. If misery loves company though, Hexo stock isn’t alone either.
Peers Aurora Cannabis (NYSE:ACB), Canopy Growth (NYSE:CGC) and New Age Beverages (NASDAQ:NBEV) have all been hit hard. Not that these companies are interchangeable. They aren’t. But in a crowded and still very young marijuana industry, some business pivoting is also inevitable. So is the very real threat that more than a few of these names will undoubtedly go belly up.
Like its peers Hexo has to face the other elephant in the room. Hurting all these companies, near-term there’s simply too much supply in the market. Canada of course has trail blazed with its policy of full legalization of cannabis, but adoption elsewhere has been slow.
In the U.S. a handful of states have opened their doors for business. Still, more meaningful acceptance, let alone national legalization, is going to take years, if ever at all. And at the end of the day, Hexo stock and its cannabis peers need regulatory approval and additional markets outside of Canada for longer-term survival and ultimately, be able to thrive.
With caveats in place, Hexo stock does have at least one solid ace in its pocket. The company is entering the niche edibles and cannabis-infused beverages market with product launches set for later this year. Further, the beverage giant Molson Coors (NYSE:TAP) has Hexo’s back.
Hexo maintains a strategic partnership with Molson Coors. As much, resources from financial support to Molson’s marketing, distribution and operational expertise give Hexo a critical early advantage as it looks to successfully build its brand.
It goes without saying the Molson Coors deal is big, but not the end all, be all either. But Hexo stock could be offering today’s investors another important ace on the price chart. Maybe.
Hexo Stock Weekly Chart
Despite the pressure on the cannabis industry the past few months and HEXO’s own precipitous corrective move, shares remain in an uptrend. That’s a rarity within the group. And with Monday’s low, shares have also established what could prove to be an intermediate low into key technical support.
The weekly chart for Hexo stock shows shares are in a testing position of its lifetime 62% retracement level. In of itself, the deep challenge is attractive from a contrarian perspective. I’m also upbeat as the price action is occurring around HEXO’s past pre-euphoric highs from early 2018 after a prior failure in late 2018 of this lateral support. Lastly, stochastics is oversold and generating a bullish crossover signal.
If a higher weekly low pattern in Hexo stock can be confirmed at current levels, it should be of technical interest to investors willing and able to allocate some speculative capital into the cannabis space. Bottom-line though, continuing to use the price chart to manage downside exposure and avoid a position going up in smoke is required for investing in Hexo stock.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.